Accordingly, there will be 1-2 state-owned commercial banks reaching regional standards in terms of scale, management, technology and competitiveness in the 2012-2015 period.

The scheme also backs voluntary banking merger and acquisition (M&A) deals to ensure the rights of depositors and the responsibility of stakeholders. Special treatment will be applied to high-risk credit institutions.

Measures to restructure credit organizations will also include an acceleration of the equitization process at state-owned commercial banks, including the Bank for Agriculture and Rural Development (Agribank) , after which the state will hold dominant stakes in those organizations.

Credit organizations will have to increase their scales and financial capacity by raising their capital, re-purchasing, merging and expanding mobilization of capital.

The State Bank of Vietnam will divide credit organizations into three groups: healthy, temporarily lacking liquidity, and weak , to find suitable solutions.

For the healthy ones, they will be encouraged to conduct M&A deals to buy out or help the weak ones by offering more lending, or merging them together.

For those temporarily lacking liquidity, the SBV will refinance to help normalize their operations. Those lenders will be restricted from lending out and will have to mobilize more money to repay their debt to SBV and increase liquidity.

They will be under the close watch of the central bank and must raise certain safety standards higher than the regular norms.

Those lenders are encouraged to merge with other ones or with healthy credit institutions.

For the weak ones, they will also be refinanced with the maximum quota equaling their registered capitals.

They will be under the strictest watch of the SBV, and they will be limited from profit/ dividend payments and stake transfers.

They will have to scale down credit growth and be barred from expanding their networks. Top managers at those lenders will be suspended or relieved from their posts in case of violations.

Once the liquidity at those lenders is normalized, they will have to merge by selling stakes to the central bank. The central bank then can resell those stakes to other credit institution or financially capable investors.

Foreign banks will be considered for joining the M&A process at those weak banks and increasing their stakes at those banks.

The Prime Minister has also asked the central bank to join hands with relevant state agencies to finish a sub-project paving the way for the central bank to buy stakes at weak credit institutions. It will be submitted to the PM before being legalized by July this year.

The Ministry of Finance will have to cooperate with the central bank to map out feasible measures to tackle bad debt and increase the registered capitals of state-run commercial banks from now to 2015.

Vietnam’s deposit insurance fund in good health

The Deposit Insurance of Vietnam (DIV) will bear no negative impact even if there are massive money withdrawals from the weak credit institutions, said its top senior official.

The government has set up all measures to tackle any worst-case scenarios, and the confidence of the peoples in the banking system has recovered, said Bui Khac Son, general director of DIV.

Though there has been much publicized information about weak lenders, as of yet there have not been any massive money withdrawals, unlike in previous years, he added.